No matter what your reason is for picking a stock; a trend, technical analysis of charts, or company fundamentals, there are some fundamental online stock trading questions you must answer before making a trade. Answering these questions should be an integral part of your decision making process, and should occur on every trade you ever make. The question that I am going to discuss in this article is almost self-explanatory. As a trader, you have to ask yourself, is there a compelling reason to believe this trade will work?

Before buying any stock, you must be able to articulate a solid reason why you believe the stock`s value will rise in the immediate future. If you`re shorting, you must have a good reason to believe its value will drop. Some traders get into positions for reasons that have no logical basis. I`ve actually heard people say they bought stocks because they `wanted to see what the stock would do,` they `like` the company, they think the stock is `due for a breakout,` or they think that it would be `a fun stock to own.`

`Wanting to see what a stock will do,` sounds a lot like gambling. Throw some money at it and see if you win or lose. There is no place in online stock trading for a gambling mentality. As for `liking` a company, that`s a bit naive. The company doesn`t like you, and its management and board of directors don`t like you. They have no idea that you even exist. Emotions should never be the basis for making a trade. It makes no sense to `like` a company. Companies exist to make money for their shareholders; your goal is to identify trades that you can make money from.

Finally, some traders buy beaten-down stocks that they think are `due for a breakout.` There is no rule that says that a company which has performed poorly in the past will rebound. Companies go out of business every day